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News Details

Essent Group Ltd. Reports First Quarter 2018 Results

05/04/2018

HAMILTON, Bermuda--(BUSINESS WIRE)-- Essent Group Ltd. (NYSE: ESNT) today reported net income for the quarter ended March 31, 2018 of $111.1 million or $1.13 per diluted share, compared to $66.6 million or $0.72 per diluted share for the quarter ended March 31, 2017. As of March 31, 2018, Essent had insurance in force of $115.3 billion and consolidated stockholders’ equity of $2.0 billion.

“We are pleased with our strong first quarter results as we continue to build a high credit quality and profitable mortgage insurance portfolio,” said Mark Casale, Chairman and Chief Executive Officer. “During the quarter, we grew insurance in force 31% compared to March 31st a year ago, while also generating a 23% annualized return on average equity. Additionally, we closed our inaugural credit risk transfer transaction, which expanded our capital sources while also providing a layer of protection against adverse credit losses.”

Financial Highlights:

  • Insurance in force as of March 31, 2018 was $115.3 billion, compared to $110.5 billion as of December 31, 2017 and $88.0 billion as of March 31, 2017.
  • New insurance written for the first quarter was $9.3 billion, compared to $11.2 billion in the fourth quarter of 2017 and $8.0 billion in the first quarter of 2017.
  • Net premiums earned for the first quarter were $152.6 million, compared to $148.0 million in the fourth quarter of 2017 and $117.7 million in the first quarter of 2017.
  • The expense ratio for the first quarter was 25.0%, compared to 24.7% in the fourth quarter of 2017 and 30.9% in the first quarter of 2017.
  • The provision for losses and LAE for the first quarter was $5.3 million, compared to $17.5 million in the fourth quarter of 2017 and $3.7 million in the first quarter of 2017.
  • The percentage of loans in default as of March 31, 2018 was 0.86%, compared to 0.96% as of December 31, 2017 and 0.45% as of March 31, 2017.
  • The combined ratio for the first quarter was 28.5%, compared to 36.4% in the fourth quarter of 2017 and 34.0% in the first quarter of 2017.
  • The consolidated balance of cash and investments at March 31, 2018 was $2.5 billion, including cash and investment balances at Essent Group Ltd. of $75.9 million.
  • The combined risk-to-capital ratio of the U.S. mortgage insurance business, which includes statutory capital for both Essent Guaranty, Inc. and Essent Guaranty of PA, Inc., was 13.6:1 as of March 31, 2018.
  • Essent Reinsurance Ltd. reinsured a total of $28.8 million of risk in GSE risk share transactions in the first quarter of 2018.
  • Net income for the first quarter includes an income tax benefit of $9.5 million, or $0.10 per diluted share, related to the vesting of common shares and common share units.
  • Obtained $424 million of reinsurance on risk relating to $41 billion of new insurance written in 2017 with the execution of the credit risk transfer transaction.
  • Finalized an amendment to our existing credit facility on May 2, 2018 that increased the amount committed by $125 million, to $500 million.

Conference Call

Essent management will hold a conference call at 10:00 AM Eastern time today to discuss its results. The conference call will be broadcast live over the Internet at http://ir.essentgroup.com/investors/webcasts-and-presentations/event-calendar/default.aspx. The call may also be accessed by dialing 866-393-4306 inside the U.S., or 734-385-2616 for international callers, using passcode 3588928 or by referencing Essent.

A replay of the webcast will be available on the Essent website approximately two hours after the live broadcast ends for a period of one year. A replay of the conference call will be available approximately two hours after the call ends for a period of two weeks, using the following dial-in numbers and passcode: 855-859-2056 inside the U.S., or 404-537-3406 for international callers, passcode 3588928.

In addition to the information provided in the company's earnings news release, other statistical and financial information, which may be referred to during the conference call, will be available on Essent's website at http://ir.essentgroup.com/investors/financial-information/quarterly-financial-supplements/default.aspx.

Forward-Looking Statements

This press release may include “forward-looking statements” which are subject to known and unknown risks and uncertainties, many of which may be beyond our control. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," “should,” “expect,” "plan," "anticipate," "believe," “estimate,” “predict,” or "potential" or the negative thereof or variations thereon or similar terminology. Actual events, results and outcomes may differ materially from our expectations due to a variety of known and unknown risks, uncertainties and other factors. Although it is not possible to identify all of these risks and factors, they include, among others, the following: changes in or to Fannie Mae and Freddie Mac (the “GSEs”), whether through Federal legislation, restructurings or a shift in business practices; failure to continue to meet the mortgage insurer eligibility requirements of the GSEs; competition for customers; lenders or investors seeking alternatives to private mortgage insurance; an increase in the number of loans insured through Federal government mortgage insurance programs, including those offered by the Federal Housing Administration; decline in new insurance written and franchise value due to loss of a significant customer; decline in the volume of low down payment mortgage originations; the definition of "Qualified Mortgage" reducing the size of the mortgage origination market or creating incentives to use government mortgage insurance programs; the definition of "Qualified Residential Mortgage" reducing the number of low down payment loans or lenders and investors seeking alternatives to private mortgage insurance; the implementation of the Basel III Capital Accord discouraging the use of private mortgage insurance; a decrease in the length of time that insurance policies are in force; uncertainty of loss reserve estimates; deteriorating economic conditions; our non-U.S. operations becoming subject to U.S. Federal income taxation; becoming considered a passive foreign investment company for U.S. Federal income tax purposes; and other risks and factors described in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2017 filed with the Securities and Exchange Commission on February 20, 2018. Any forward-looking information presented herein is made only as of the date of this press release, and we do not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

Non-GAAP Financial Measures

In presenting Essent Group Ltd.’s results, management has included financial measures, including adjusted book value per share, that are not calculated under standards or rules that comprise accounting principles generally accepted in the United States (“GAAP”). Such measures are referred to as “non-GAAP measures.” These non-GAAP measures may be defined or calculated differently by other companies. Management believes these measures allow for a more complete understanding of the underlying business. These measures are used to monitor our results and should not be viewed as a substitute for those determined in accordance with GAAP. Reconciliations of such measures to the most comparable GAAP figures are included in the attached financial supplement in accordance with Regulation G.

About the Company

Essent Group Ltd. (NYSE: ESNT) is a Bermuda-based holding company (collectively with its subsidiaries, “Essent”) which, through its wholly-owned subsidiary Essent Guaranty, Inc., offers private mortgage insurance for single-family mortgage loans in the United States. Essent provides private capital to mitigate mortgage credit risk, allowing lenders to make additional mortgage financing available to prospective homeowners. Headquartered in Radnor, Pennsylvania, Essent Guaranty, Inc. is licensed to write mortgage insurance in all 50 states and the District of Columbia, and is approved by Fannie Mae and Freddie Mac. Essent also offers mortgage-related insurance, reinsurance and advisory services through its Bermuda-based subsidiary, Essent Reinsurance Ltd. Additional information regarding Essent may be found at www.essentgroup.com and www.essent.us.

Source: Essent Group Ltd.

   
Essent Group Ltd. and Subsidiaries
Financial Results and Supplemental Information (Unaudited)
Quarter Ended March 31, 2018
 
 
Exhibit A Condensed Consolidated Statements of Comprehensive Income (Unaudited)
Exhibit B Condensed Consolidated Balance Sheets (Unaudited)
Exhibit C Historical Quarterly Data
Exhibit D New Insurance Written
Exhibit E Insurance in Force and Risk in Force
Exhibit F Other Risk in Force
Exhibit G Portfolio Vintage Data
Exhibit H Portfolio Geographic Data
Exhibit I Defaults, Reserve for Losses and LAE, and Claims
Exhibit J Investment Portfolio
Exhibit K Insurance Company Capital
Exhibit L Reconciliation of Non-GAAP Financial Measure - Adjusted Book Value per Share
 
   
Exhibit A
 
Essent Group Ltd. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
 
 
Three Months Ended March 31,

(In thousands, except per share amounts)

2018 2017
Revenues:
Net premiums written $ 165,225 $ 119,297
Increase in unearned premiums (12,667 ) (1,646 )
Net premiums earned 152,558 117,651
Net investment income 13,714 8,435
Realized investment gains, net 197 655
Other income 994   851  
Total revenues 167,463   127,592  
 
Losses and expenses:
Provision for losses and LAE 5,309 3,693
Other underwriting and operating expenses 38,124 36,332
Interest expense 2,450   716  
Total losses and expenses 45,883   40,741  
 
Income before income taxes 121,580 86,851
Income tax expense 10,511   20,253  
Net income $ 111,069   $ 66,598  
 
 
Earnings per share:
Basic $ 1.14 $ 0.73
Diluted 1.13 0.72
 
Weighted average shares outstanding:
Basic 97,298 91,258
Diluted 97,951 93,023
 
Net income $ 111,069 $ 66,598
 
Other comprehensive income (loss):
Change in unrealized (depreciation) appreciation of investments (28,750 ) 4,850  
Total other comprehensive (loss) income (28,750 ) 4,850  
Comprehensive income $ 82,319   $ 71,448  
 
 
Loss ratio 3.5 % 3.1 %
Expense ratio 25.0   30.9  
Combined ratio 28.5 % 34.0 %
 
   
Exhibit B
 
Essent Group Ltd. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
 
 
March 31, December 31,

(In thousands, except per share amounts)

2018 2017
Assets
Investments available for sale, at fair value
Fixed maturities $ 2,080,365 $ 1,992,371
Short-term investments 380,762   312,694  
Total investments 2,461,127 2,305,065
Cash 32,958 43,524
Accrued investment income 14,383 12,807
Accounts receivable 45,953 29,752
Deferred policy acquisition costs 15,563 15,354
Property and equipment 6,590 6,979
Prepaid federal income tax 151,294 252,157
Other assets 13,349   8,730  
 
Total assets $ 2,741,217   $ 2,674,368  
 
Liabilities and Stockholders' Equity
Liabilities
Reserve for losses and LAE $ 49,966 $ 46,850
Unearned premium reserve 272,339 259,672
Net deferred tax liability 132,325 127,636
Credit facility borrowings, net of deferred costs 263,697 248,591
Securities purchased payable 6,201 14,999
Other accrued liabilities 21,399   36,184  
Total liabilities 745,927   733,932  
 
Commitments and contingencies
 
Stockholders' Equity
Common shares 1,472 1,476
Additional paid-in capital 1,099,676 1,127,137
Accumulated other comprehensive loss (32,002 ) (3,252 )
Retained earnings 926,144   815,075  
Total stockholders' equity 1,995,290   1,940,436  
 
Total liabilities and stockholders' equity $ 2,741,217   $ 2,674,368  
 
Return on average equity (1) 22.6 % 23.1 %
 

(1) The 2018 return on average equity is calculated by dividing annualized year-to-date 2018 net income by average equity. The 2017 return on average equity is calculated by dividing full year 2017 net income by average equity.

 
       
Exhibit C
Essent Group Ltd. and Subsidiaries
Supplemental Information
Historical Quarterly Data
 
 
2018 2017
Selected Income Statement Data March 31 December 31 September 30 June 30 March 31

(In thousands, except per share amounts)

Revenues:
Net premiums written $ 165,225   $ 161,771   $ 155,055   $ 134,063   $ 119,297  
 
Net premiums earned 152,558 147,976 137,940 126,563 117,651
Other revenues 14,905   13,134   12,263   11,043   9,941  
Total revenues 167,463   161,110   150,203   137,606   127,592  
 
Losses and expenses:
Provision for losses and LAE 5,309 17,456 4,313 1,770 3,693
Other underwriting and operating expenses 38,124 36,480 37,035 35,686 36,332
Interest expense 2,450   1,817   1,456   1,189   716  
Total losses and expenses 45,883   55,753   42,804   38,645   40,741  
 
Income before income taxes 121,580 105,357 107,399 98,961 86,851
Income tax expense (benefit) (1) (2) 10,511   (57,281 ) 29,006   26,843   20,253  
Net income $ 111,069   $ 162,638   $ 78,393   $ 72,118   $ 66,598  
 
Earnings per share:
Basic $ 1.14 $ 1.69 $ 0.83 $ 0.79 $ 0.73
Diluted 1.13 1.65 0.82 0.77 0.72
 
Weighted average shares outstanding:
Basic 97,298 96,429 94,185 91,381 91,258
Diluted 97,951 98,497 96,094 93,162 93,023
 
Other Data:
Loss ratio (3) 3.5 % 11.8 % 3.1 % 1.4 % 3.1 %
Expense ratio (4) 25.0   24.7   26.8   28.2   30.9  
Combined ratio 28.5 % 36.4 % 30.0 % 29.6 % 34.0 %
 
Return on average equity (annualized) 22.6 % 35.0 % 19.1 % 19.8 % 19.3 %
 
(1) Income tax expense for the quarters ended March 31, 2018 and 2017 was reduced by $9,549 and $3,023, respectively, of excess tax benefits associated with the vesting of common shares and common share units during each period.
(2) Income tax expense for the quarter ended December 31, 2017 was reduced by $85,091 of income tax benefit due to the one-time impact of the reduced U.S. corporate income tax rate on the company's net deferred tax liability position.
(3) Loss ratio is calculated by dividing the provision for losses and LAE by net premiums earned.
(4) Expense ratio is calculated by dividing other underwriting and operating expenses by net premiums earned.
 
       
Exhibit C, continued
Essent Group Ltd. and Subsidiaries
Supplemental Information
Historical Quarterly Data
 
 
2018 2017
Other Data, continued: March 31 December 31 September 30 June 30 March 31

($ in thousands)

 
U.S. Mortgage Insurance Portfolio
Flow:
New insurance written $ 9,336,150 $ 11,234,855 $ 13,221,038 $ 11,368,276 $ 8,034,153
New risk written 2,295,314 2,737,008 3,228,603 2,786,501 1,929,832
 
Bulk:
New insurance written $ $ $ $ $
New risk written
 
Total:
Average premium rate (5) 0.52 % 0.53 % 0.53 % 0.53 % 0.53 %
New insurance written $ 9,336,150 $ 11,234,855 $ 13,221,038 $ 11,368,276 $ 8,034,153
New risk written $ 2,295,314 $ 2,737,008 $ 3,228,603 $ 2,786,501 $ 1,929,832
Insurance in force (end of period) $ 115,250,949 $ 110,461,950 $ 103,936,307 $ 95,494,390 $ 87,993,227
Risk in force, gross (end of period) (6) $ 28,691,561 $ 27,443,985 $ 25,807,358 $ 23,665,045 $ 21,801,667
Risk in force (end of period) $ 28,267,149 $ 27,443,985 $ 25,807,358 $ 23,665,045 $ 21,801,667
Policies in force 517,215 496,477 467,483 430,585 397,650
Weighted average coverage (7) 24.9 % 24.8 % 24.8 % 24.8 % 24.8 %
Annual persistency 83.5 % 83.9 % 82.1 % 80.1 % 78.2 %
 
Loans in default (count) 4,442 4,783 2,153 1,776 1,777
Percentage of loans in default 0.86 % 0.96 % 0.46 % 0.41 % 0.45 %
 
Other Risk in Force
GSE Risk Share (8) $ 557,692 $ 538,944 $ 501,485 $ 479,762 $ 436,991
 
Credit Facility
Borrowings outstanding $ 265,000 $ 250,000 $ 175,000 $ 175,000 $ 125,000
Undrawn committed capacity $ 110,000 $ 125,000 $ 200,000 $ 200,000 $ 75,000
Weighted average interest rate 3.82 %
 

(5) Average premium rate is calculated by dividing annualized net premiums earned for the U.S. mortgage insurance portfolio by average insurance in force for the period.

(6) Gross risk in force includes risk ceded under third-party reinsurance.

(7) Weighted average coverage is calculated by dividing end of period gross risk in force by insurance in force.

(8) Essent Re provides insurance or reinsurance relating to the risk in force on loans in reference pools acquired by Freddie Mac and Fannie Mae, including in connection with Freddie Mac's Agency Credit Insurance Structure ("ACIS") and Fannie Mae's Credit Insurance Risk Transfer ("CIRT") programs.
 
     
Exhibit D
 
Essent Group Ltd. and Subsidiaries
Supplemental Information
New Insurance Written: Flow
 
 
NIW by Credit Score
Three Months Ended
March 31, 2018 December 31, 2017 March 31, 2017

($ in thousands)

>=760

$ 3,832,218 41.0 % $ 4,551,775 40.5 % $ 3,399,754 42.3 %

740-759

1,550,138 16.6 1,793,713 16.0 1,243,278 15.5

720-739

1,339,145 14.3 1,644,956 14.6 1,149,215 14.3

700-719

1,144,900 12.3 1,378,170 12.3 958,015 11.9

680-699

809,618 8.7 1,024,440 9.1 694,814 8.7

<=679

660,131   7.1   841,801   7.5   589,077   7.3  
Total $ 9,336,150   100.0 % $ 11,234,855   100.0 % $ 8,034,153   100.0 %
 
Weighted average credit score 744 743 745
 
 
 
NIW by LTV
Three Months Ended
March 31, 2018 December 31, 2017 March 31, 2017

($ in thousands)

85.00% and below $ 1,212,336 13.0 % $ 1,532,008 13.6 % $ 1,218,800 15.2 %
85.01% to 90.00% 2,708,512 29.0 3,286,879 29.3 2,498,907 31.1
90.01% to 95.00% 4,078,208 43.7 4,845,713 43.1 3,511,603 43.7
95.01% and above 1,337,094   14.3   1,570,255   14.0   804,843   10.0  
Total $ 9,336,150   100.0 % $ 11,234,855   100.0 % $ 8,034,153   100.0 %
 
Weighted average LTV 92 % 92 % 92 %
 
 
 
NIW by Product
Three Months Ended
March 31, 2018 December 31, 2017 March 31, 2017
Single Premium policies 20.3 % 19.0 % 14.2 %
Monthly Premium policies 79.7   81.0   85.8  
100.0 % 100.0 % 100.0 %
 
 
 
NIW by Purchase vs. Refinance
Three Months Ended
March 31, 2018 December 31, 2017 March 31, 2017
Purchase 85.3 % 84.4 % 78.9 %
Refinance 14.7   15.6   21.1  
100.0 % 100.0 % 100.0 %
 
     
Exhibit E
 
Essent Group Ltd. and Subsidiaries
Supplemental Information
Insurance in Force and Risk in Force
 
 
Portfolio by Credit Score
IIF by FICO score March 31, 2018 December 31, 2017 March 31, 2017

($ in thousands)

>=760 $ 50,359,464 43.7 % $ 48,668,705 44.1 % $ 39,724,096 45.1 %

740-759

18,791,203 16.3 17,939,206 16.2 14,460,034 16.4

720-739

16,473,367 14.3 15,761,787 14.3 12,550,737 14.3

700-719

12,857,417 11.2 12,167,285 11.0 9,325,770 10.6

680-699

9,622,067 8.3 9,156,196 8.3 7,051,155 8.0
<=679 7,147,431   6.2   6,768,771   6.1   4,881,435   5.6  
Total $ 115,250,949   100.0 % $ 110,461,950   100.0 % $ 87,993,227   100.0 %
 
Weighted average credit score 747 747 748
 
RIF, gross by FICO score March 31, 2018 December 31, 2017 March 31, 2017

($ in thousands)

>=760 $ 12,519,237 43.6 % $ 12,058,196 43.9 % $ 9,791,036 44.9 %

740-759

4,707,875 16.4 4,485,439 16.4 3,609,590 16.6

720-739

4,142,041 14.5 3,957,922 14.4 3,146,943 14.4

700-719

3,192,804 11.1 3,018,341 11.0 2,303,107 10.6

680-699

2,402,777 8.4 2,286,082 8.3 1,762,997 8.1
<=679 1,726,827   6.0   1,638,005   6.0   1,187,994   5.4  
Total $ 28,691,561   100.0 % $ 27,443,985   100.0 % $ 21,801,667   100.0 %
 
Portfolio by LTV
IIF by LTV March 31, 2018 December 31, 2017 March 31, 2017

($ in thousands)

85.00% and below $ 13,371,220 11.6 % $ 12,917,751 11.7 % $ 10,403,824 11.8 %
85.01% to 90.00% 35,907,759 31.2 34,794,108 31.5 28,744,011 32.7
90.01% to 95.00% 56,367,801 48.9 54,323,103 49.2 44,862,812 51.0
95.01% and above 9,604,169   8.3   8,426,988   7.6   3,982,580   4.5  
Total $ 115,250,949   100.0 % $ 110,461,950   100.0 % $ 87,993,227   100.0 %
 
Weighted average LTV 92 % 92 % 92 %
 
RIF, gross by LTV March 31, 2018 December 31, 2017 March 31, 2017

($ in thousands)

85.00% and below $ 1,519,929 5.3 % $ 1,462,351 5.3 % $ 1,172,920 5.4 %
85.01% to 90.00% 8,543,010 29.8 8,262,322 30.1 6,821,725 31.3
90.01% to 95.00% 16,176,713 56.4 15,576,125 56.8 12,829,032 58.8
95.01% and above 2,451,909   8.5   2,143,187   7.8   977,990   4.5  
Total $ 28,691,561   100.0 % $ 27,443,985   100.0 % $ 21,801,667   100.0 %
 
Portfolio by Loan Amortization Period
IIF by Loan Amortization Period March 31, 2018 December 31, 2017 March 31, 2017

($ in thousands)

FRM 30 years and higher $ 105,438,023 91.5 % $ 100,592,946 91.1 % $ 79,647,327 90.5 %
FRM 20-25 years 3,008,292 2.6 2,879,977 2.6 2,298,806 2.6
FRM 15 years 3,746,030 3.2 3,857,152 3.5 3,290,900 3.8
ARM 5 years and higher 3,058,604   2.7   3,131,875   2.8   2,756,194   3.1  
Total $ 115,250,949   100.0 % $ 110,461,950   100.0 % $ 87,993,227   100.0 %
 
     
Exhibit F
 
Essent Group Ltd. and Subsidiaries
Supplemental Information
Other Risk in Force
 
 

($ in thousands)

March 31, 2018 December 31, 2017 March 31, 2017
 
GSE Risk Share (1) $ 557,692   $ 538,944   $ 436,991  
 
Weighted average credit score 751 749 750
Weighted average LTV 84 % 84 % 83 %
 

(1) Essent Reinsurance Ltd. ("Essent Re") provides insurance or reinsurance relating to the risk in force on loans in reference pools acquired by Freddie Mac and Fannie Mae, including in connection with Freddie Mac's Agency Credit Insurance Structure ("ACIS") and Fannie Mae's Credit Insurance Risk Transfer ("CIRT") programs.

 
                       
Exhibit G
 
Essent Group Ltd. and Subsidiaries
Supplemental Information
Portfolio Vintage Data
March 31, 2018
 
 
Insurance in Force
Origination Year  

Original
Insurance
Written

($ in thousands)

 

Remaining
Insurance
in Force
($ in thousands)

 

% Remaining of
Original
Insurance

 

Number of
Policies in
Force

  % Purchase   >90% LTV   >95% LTV   FICO < 700   FICO >= 760   % FRM  

Incurred
Loss Ratio
(Inception
to Date) (1)

 

Number of
Loans in
Default

 
2010 $ 245,898 $ 11,906 4.8 % 84 75.2 % 72.2 % 0.0 % 3.0 % 66.2 % 100.0 % 2.6 %
2011 3,229,720 356,998 11.1 2,063 77.3 48.4 0.2 5.7 54.0 97.7 3.7 37
2012 11,241,161 2,531,515 22.5 13,199 76.7 57.5 0.5 5.6 56.1 98.6 2.4 133
2013 21,152,638 6,393,562 30.2 32,826 79.8 58.9 1.9 7.9 51.4 98.1 2.4 365
2014 24,799,434 10,124,415 40.8 52,696 88.2 62.1 4.2 15.4 41.9 95.6 3.5 791
2015 26,193,656 16,271,432 62.1 75,633 83.6 57.0 2.5 14.6 43.9 97.1 3.9 885
2016 34,949,319 29,173,825 83.5 125,675 80.6 55.0 6.3 13.8 45.2 98.2 4.5 1,080
2017 43,858,322 41,114,906 93.7 177,474 85.3 57.3 13.3 16.3 41.6 96.9 7.0 1,146
2018 (through March 31) 9,336,150   9,272,390 99.3 37,565 85.3 58.0 14.4 15.8 41.0 98.0 0.9 5
Total $ 175,006,298   $ 115,250,949 65.9 517,215 83.6 57.2 8.3 14.6 43.7 97.3 3.6 4,442
 
(1) Incurred loss ratio is calculated by dividing the sum of case reserves and cumulative amount paid for claims by cumulative net premiums earned.
 
     
Exhibit H
 
Essent Group Ltd. and Subsidiaries
Supplemental Information
Portfolio Geographic Data
 
 
IIF by State
March 31, 2018 December 31, 2017 March 31, 2017
CA 9.4 % 9.4 % 9.4 %
TX 8.0 8.0 8.2
FL 7.1 7.0 6.8
WA 4.8 4.8 4.8
IL 3.9 4.0 3.9
NJ 3.7 3.7 3.6
NC 3.5 3.5 3.6
GA 3.4 3.4 3.4
OH 3.2 3.2 3.1
AZ 3.2 3.1 3.2
All Others 49.8   49.9   50.0  
Total 100.0 % 100.0 % 100.0 %
 
 
 

RIF, gross by State

March 31, 2018 December 31, 2017 March 31, 2017
CA 9.1 % 9.1 % 9.0 %
TX 8.2 8.3 8.5
FL 7.2 7.1 7.0
WA 4.9 4.9 4.9
IL 3.8 3.9 3.9
NJ 3.7 3.6 3.5
NC 3.5 3.5 3.7
GA 3.5 3.5 3.5
OH 3.3 3.2 3.1
AZ 3.1 3.1 3.1
All Others 49.7   49.8   49.8  
Total 100.0 % 100.0 % 100.0 %
 
     
Exhibit I
 
Essent Group Ltd. and Subsidiaries
Supplemental Information
Defaults, Reserve for Losses and LAE, and Claims
 
 
Rollforward of Insured Loans in Default
Three Months Ended
March 31, December 31, March 31,
2018 2017 2017
Beginning default inventory 4,783 2,153 1,757
Plus: new defaults 1,994 4,332 1,200
Less: cures (2,270 ) (1,648 ) (1,114 )
Less: claims paid (63 ) (53 ) (65 )
Less: rescissions and denials, net (2 ) (1 ) (1 )
Ending default inventory 4,442   4,783   1,777  
 
 
 
Rollforward of Reserve for Losses and LAE
Three Months Ended
March 31, December 31, March 31,

($ in thousands)

2018 2017 2017
Reserve for losses and LAE at beginning of period $ 46,850   $ 31,579   $ 28,142  
Add provision for losses and LAE occurring in:
Current year 9,952 18,912 7,090
Prior years (4,643 ) (1,456 ) (3,397 )
Incurred losses and LAE during the period 5,309   17,456   3,693  
Deduct payments for losses and LAE occurring in:
Current year 390 1
Prior years 2,193   1,795   2,366  
Loss and LAE payments during the period 2,193   2,185   2,367  
Reserve for losses and LAE at end of period $ 49,966   $ 46,850   $ 29,468  
 
 
 
Claims
Three Months Ended
March 31, December 31, March 31,
2018 2017 2017
Number of claims paid 63 53 65
Total amount paid for claims (in thousands) $ 2,143 $ 2,125 $ 2,307
Average amount paid per claim (in thousands) $ 34 $ 40 $ 35
Severity 76 % 87 % 87 %
 
         
Exhibit I, continued
Essent Group Ltd. and Subsidiaries
Supplemental Information
Defaults, Reserve for Losses and LAE, and Claims
 
 
March 31, 2018

Number of
Policies in
Default

 

Percentage of
Policies in
Default

 

Amount of
Reserves

 

Percentage of
Reserves

  Defaulted RIF  

Reserves as a
Percentage of
Defaulted RIF

($ in thousands)

Missed Payments:
Three payments or less 1,958 44 % $ 10,879 24 % $ 110,964 10 %
Four to eleven payments 2,214 50 25,547 56 130,461 20
Twelve or more payments 239 5 7,877 17 13,343 59
Pending claims 31     1     1,399   3     1,576 89
Total case reserves 4,442     100 % 45,702 100 %   $ 256,344 18
IBNR 3,428
LAE 836
Total reserves for losses and LAE $ 49,966
 
Average reserve per default:
Case $ 10.3
Total $ 11.2
 
Default Rate 0.86%
 
December 31, 2017

Number of
Policies in
Default

 

Percentage of
Policies in
Default

 

Amount of
Reserves

 

Percentage of
Reserves

  Defaulted RIF  

Reserves as a
Percentage of
Defaulted RIF

($ in thousands)

Missed Payments:
Three payments or less 3,243 68 % $ 15,925 37 % $ 187,163 9 %
Four to eleven payments 1,284 27 18,087 42 73,547 25
Twelve or more payments 211 4 6,781 16 11,139 61
Pending claims 45     1     2,075   5     2,355 88
Total case reserves 4,783     100 % 42,868 100 %   $ 274,204 16
IBNR 3,215
LAE 767
Total reserves for losses and LAE $ 46,850
 
Average reserve per default:
Case $ 9.0
Total $ 9.8
 
Default Rate 0.96%
 
March 31, 2017

Number of
Policies in
Default

 

Percentage of
Policies in
Default

 

Amount of
Reserves

 

Percentage of
Reserves

  Defaulted RIF  

Reserves as a
Percentage of
Defaulted RIF

($ in thousands)

Missed Payments:
Three payments or less 869 49 % $ 6,426 24 % $ 50,004 13 %
Four to eleven payments 690 39 13,428 50 38,252 35
Twelve or more payments 184 10 5,673 21 9,403 60
Pending claims 34     2     1,437   5     1,748 82
Total case reserves 1,777     100 % 26,964 100 %   $ 99,407 27
IBNR 2,022
LAE 482
Total reserves for losses and LAE $ 29,468
 
Average reserve per default:
Case $ 15.2
Total $ 16.6
 
Default Rate 0.45%
 
       
Exhibit J
 
Essent Group Ltd. and Subsidiaries
Supplemental Information
Investment Portfolio
 
 
Investment Portfolio by Asset Class
Asset Class March 31, 2018 December 31, 2017

($ in thousands)

Fair Value Percent Fair Value Percent
U.S. Treasury securities $ 204,556 8.3 % $ 227,805 9.9 %
U.S. agency securities 32,821 1.3 33,114 1.4
U.S. agency mortgage-backed securities 476,220 19.3 456,037 19.8
Municipal debt securities 478,933 19.5 465,255 20.2
Corporate debt securities 626,943 25.5 611,728 26.5
Residential and commercial mortgage securities 86,430 3.5 79,407 3.5
Asset-backed securities 183,449 7.5 167,922 7.3
Money market funds 371,775   15.1   263,797   11.4  
Total Investments $ 2,461,127   100.0 % $ 2,305,065   100.0 %
 
Investment Portfolio by Credit Rating
Rating (1) March 31, 2018 December 31, 2017

($ in thousands)

Fair Value Percent Fair Value Percent
Aaa $ 1,286,694 52.3 % $ 1,160,200 50.3 %
Aa1 130,010 5.3 115,237 5.0
Aa2 122,350 5.0 123,551 5.4
Aa3 127,961 5.2 127,785 5.6
A1 220,156 8.9 205,369 8.9
A2 151,375 6.1 157,651 6.8
A3 135,577 5.5 148,246 6.4
Baa1 133,319 5.4 115,178 5.0
Baa2 98,590 4.0 87,869 3.8
Baa3 36,221 1.5 43,024 1.9
Below Baa3 18,874   0.8   20,955   0.9  
Total Investments $ 2,461,127   100.0 % $ 2,305,065   100.0 %
 
(1) Based on ratings issued by Moody's, if available. S&P or Fitch rating utilized if Moody's not available.
 
Investment Portfolio by Duration and Book Yield
Effective Duration March 31, 2018 December 31, 2017

($ in thousands)

Fair Value Percent Fair Value Percent
< 1 Year $ 707,892 28.8 % $ 628,958 27.3 %
1 to < 2 Years 141,339 5.7 164,856 7.2
2 to < 3 Years 293,604 11.9 280,177 12.2
3 to < 4 Years 199,392 8.1 263,799 11.4
4 to < 5 Years 311,762 12.7 263,273 11.4
5 or more Years 807,138   32.8   704,002   30.5  
Total Investments $ 2,461,127   100.0 % $ 2,305,065   100.0 %
 
Pre-tax investment income yield:
Three months ended March 31, 2018 2.39 %
 
Net cash and investments at holding company, Essent Group Ltd.:

($ in thousands)

As of March 31, 2018 $ 75,947
As of December 31, 2017 $ 104,167
 
       
Exhibit K
 
Essent Group Ltd. and Subsidiaries
Supplemental Information
Insurance Company Capital
 
 
March 31, 2018 December 31, 2017

($ in thousands)

U.S. Mortgage Insurance Subsidiaries:
Combined statutory capital (1) $ 1,633,888 $ 1,528,869
 
Combined net risk in force (2) $ 22,181,471 $ 21,637,409
 
Risk-to-capital ratios: (3)
Essent Guaranty, Inc. 14.1:1 14.7:1
Essent Guaranty of PA, Inc. 5.0:1 5.4:1
Combined (4) 13.6:1 14.2:1
 
Essent Reinsurance Ltd.:
Stockholder's equity (GAAP basis) $ 684,762 $ 662,819
 
Net risk in force (2) $ 6,594,240 $ 6,299,437
 
(1) Combined statutory capital equals the sum of statutory capital of Essent Guaranty, Inc. plus Essent Guaranty of PA, Inc., after eliminating the impact of intercompany transactions. Statutory capital is computed based on accounting practices prescribed or permitted by the Pennsylvania Insurance Department and the National Association of Insurance Commissioners Accounting Practices and Procedures Manual.
(2) Net risk in force represents total risk in force, net of reinsurance ceded and net of exposures on policies for which loss reserves have been established.
(3) The risk-to-capital ratio is calculated as the ratio of net risk in force to statutory capital.
(4) The combined risk-to-capital ratio equals the sum of the net risk in force of Essent Guaranty, Inc. and Essent Guaranty of PA, Inc. divided by the combined statutory capital.
 
         
Exhibit L
Essent Group Ltd. and Subsidiaries
Supplemental Information
Reconciliation of Non-GAAP Financial Measure - Adjusted Book Value per Share
 

We believe that long-term growth in Adjusted Book Value per Share is an important measure of our financial performance and is a measure used to determine vesting on certain restricted stock granted to senior management under the Company’s long-term incentive plan.  Adjusted Book Value per Share is a financial measure that is not calculated under standards or rules that comprise accounting principles generally accepted in the United States (GAAP) and is referred to as a non-GAAP measure. Adjusted Book Value per Share may be defined or calculated differently by other companies. Adjusted Book Value per Share is one measure used to monitor our results and should not be viewed as a substitute for those measures determined in accordance with GAAP.

 

Adjusted Book Value per Share is calculated by dividing Adjusted Book Value by Common Shares and Share Units Outstanding.  Adjusted Book Value is defined as consolidated stockholders’ equity of the Company, excluding accumulated other comprehensive income (loss) plus the proceeds, if any, from the assumed exercise of all "in-the-money" options, warrants and similar instruments.  Common Shares and Share Units Outstanding is defined as total common shares outstanding plus all equity instruments (including restricted share units) issued to management and the Board of Directors and any "in-the-money" options, warrants and similar instruments.  Accumulated other comprehensive income (loss) includes unrealized gains and losses that arise from changes in the market value of the Company’s investments that are classified as available for sale. The Company does not view these unrealized gains and losses to be indicative of our fundamental operating performance.  As of March 31, 2018, December 31, 2017 and March 31, 2017, the Company does not have any options, warrants and similar instruments outstanding.

 

The following table sets forth the reconciliation of Adjusted Book Value to the most comparable GAAP amount as of March 31, 2018, December 31, 2017 and March 31, 2017 in accordance with Regulation G:

     

(In thousands, except per share amounts)

March 31,
2018

December 31,
2017

March 31,
2017

 
Numerator:
Total Stockholders' Equity (Book Value) $ 1,995,290 $ 1,940,436 $ 1,412,752
 
Subtract: Accumulated Other Comprehensive Income (Loss) (32,002 ) (3,252 ) (7,405 )
 
Adjusted Book Value $ 2,027,292   $ 1,943,688   $ 1,420,157  
 
Denominator:
Total Common Shares Outstanding 98,102 98,434 93,377
 
Add: Restricted Share Units Outstanding 456   536   598  
 
Total Common Shares and Share Units Outstanding 98,558   98,970   93,975  
 
Adjusted Book Value per Share $ 20.57   $ 19.64   $ 15.11  
 

Essent Group Ltd.
Media Contact
610-230-0556
media@essentgroup.com
or
Investor Relations Contact
Christopher G. Curran
Senior Vice President – Investor Relations
855-809-ESNT
ir@essentgroup.com

Source: Essent Group Ltd.